But as the Brent crude price climbs from the sub-$30 lows of 2016 to above US$80 per barrel – and with predictions the rally still has legs – SWF outbound property investment volumes are set to bounce back, too.

Oil price drives real estate fortunes – with a lag

Since 2003, outbound investment by oil-dependent SWFs has exhibited a 70 percent correlation with the two-year lagged price of oil, according to data from JLL.

Brent crude hit its most recent high of US$113 in June 2014, before tumbling to US$45 in January 2015, and then US$27 a year later. As oil prices collapsed, outbound investment by oil-dependent SWFs fell as well, dropping by an average of 60 percent since 2015.

In 2017, oil-dependent SWFs made cross-border acquisitions of just US$4.7 billion, the lowest level since 2011.

However, a change is now in sight.

SWFs have long been eager to reduce their reliance on petrodollars, in an effort to generate more diverse and stable revenue streams that will bolster their economies and long-term prospects.

“The surge in oil prices now taking place, combined with new sources of oil-dependent SWF liquidity, are therefore expected to contribute to a recovery in outbound investment volumes,” says Sethuraman.

Evidence is already emerging. At the beginning of October, the Norwegian government proposed depositing 24 billion kroner (US$2.9 billion) into its wealth fund this year and 53 billion kroner (US$6.4 billion) next year on the back of the oil price gains, reversing two years of withdrawals. The injections will enable the US$1 trillion fund, the world’s largest SWF, to make more real estate investments, along with new investments, without having to pare its portfolio, according to Bloomberg.

Funds diversify further into alternative real estate markets

Where the uptick in funds is allocated is also progressively changing, says Sethuraman.

For instance, in July a consortium including Singapore’s Temasek made a US$500 million Series B investment in co-working provider WeWork China. Another consortium that included a subsidiary of the Abu Dhabi Investment Authority recently bought a 51 percent stake in Sydney’s WestConnex toll-road motorway project.

“This is a trend we will continue to see going forward, given the alternatives sectors and emerging markets offer the most favourable long-term growth prospects,” says Sethuraman.